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(c)

Issuers must make periodic financial reports to the SEHK.

Underlying securities must have market capitalization of at least $10 billion and public float of at least $4 billion, or otherwise have exceptionally high liquidity as required by the SEHK.

The aggregate number of warrants over a particular underlying share must not exceed 20% of total issued shares or 30% of public float.

These rules are closely monitored and revised from time to time to keep abreast of changes in the market.

In addition, the SFC maintains a data base in relation to derivative warrants and regularly tracks the market values of outstanding warrants and the expected changes in such values under various hypothetical market movements using options pricing models. This is done on a per warrant basis, per underlying stock basis, per issuer basis, and in aggregate. The SFC also collects periodic data on the hedging positions of warrant issuers, including hedging in underlying stocks.

While warrants trading may appear to reduce stamp duty revenue in the sense that warrants could be perceived as a lower priced proxy for the underlying securities, its impact on revenue is usually positive because warrant issuers often hedge their exposures via delta hedging, involving purchases and sales of the underlying securities, which in turn generate stamp duty revenue. Moreover, stamp duty is payable if the warrants are exercised into the underlying securities and stamp duty is also payable for the trading of warrants. The impact of derivatives warrants trading on stamp duty must therefore be positive.